Private financing pays for £550m Heads of the Valleys section

10/11/2020
Rhodri Clark

The Welsh Government has awarded a major road widening contract, which will use private finance and is estimated to be worth more than half a billion pounds.

The new contract to dual 18km of the A465 Heads of the Valleys road between Dowlais and Hirwaun uses the Welsh Government’s Mutual Investment Model (MIM), a PFI variant in which the government holds a stake.

The Future Valleys consortium of FCC, Roadbridge, Meridiam, Alun Griffiths and Atkins will work with Welsh contractors and design teams. Construction, estimated to cost more than £550m, is due to start early next year and end in mid-2025.

Wales made much less use than England of the Private Finance Initiative but has sought to develop the model to make up for limited investment cash in infrastructure.

For 30 years, the Future Valleys consortium will receive government payments – an amount the government declined to disclose – while operating and maintaining the road.

The MIM was developed when the government expected to spend more than £1bn of its own funding on the now-cancelled M4 Relief Road at Newport, which would have meant alternative funding was needed for the A465.

Asked why the government was using private finance instead of borrowing, a spokesman said: ‘The MIM was developed following a decade of austerity and unprecedented pressures on capital budgets. The model has provisions to secure community benefits, sustainable development and ethical employment practices.’

Welsh transport minister Ken Skates said: ‘While it is inevitable there will be disruption while the project is being built, the contract requires Future Valleys to mitigate these impacts, with financial penalties for non-performance.’

Finance minister Rebecca Evans said this was the first use of the MIM, which ‘provides the best opportunity to complete the scheme as quickly as possible’. She added that having such a large project ready to go ‘has the real potential to accelerate the regional recovery’.

Dualling the A465 between Gilwern and Brynmawr remains unfinished, with contractor Costain writing off £45m following arbitration of its dispute with the government.

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